A Country Fire Authority firefighter takes a break while fighting a bushfire at Bunyip state forest near Tonimbuk, Australia Photograph: Andrew Brownbill/EPA

At least 35 people have died in Australia's worst wildfire disaster in decades as flames rage across the south-east of the country. There are fears that the death toll could exceed 40.

A fatal combination of scorching temperatures, tinder-dry leaves and strong winds saw huge bush fires engulf parts of Victoria, New South Wales and South Australia.

Worst hit was Victoria, with 35 confirmed deaths in a massive blaze that swept through four rural towns in the Gippsland farming region, east of Melbourne, as firefighters struggled on at least 12 major fronts. Witnesses described seeing trees exploding and skies raining ash.

Six people in one car were killed at Kinglake, while four deaths were reported at nearby Wandong, three at Strathewen and one in Clonbinane.

"This is an absolute tragedy for the state and we believe the figure may even get worse," said state deputy police commissioner Kiernan Walshe. "We base that on the fact that we're only just getting into these areas now... to search buildings... the figure could get into the forties."

Hundreds of homes had been razed to the ground and police believe arsonists are responsible for some of the blazes.

The Gippsland fire started in a national park of old-growth eucalyptus trees, but was fanned into the towns by strong winds, destroying some 115 square miles in its path.

Peter Mitchell, a resident of Kinglake, said the town had no time to act as the fire raced through. "The whole township is pretty much on fire," he told ABC radio. "There was no time to do anything... it came through in minutes. There'll be a massive loss of houses... there'll be a lot of us homeless. All those who have made it into town will be fine. The others will be sheltering and working on their fire plans - God help them."

Another caller said her mother-in-law's house in Kinglake had been overcome by fire in just 15 minutes. "The roads are on fire, everything around us is burning, there are things blowing up, a lot of houses have burnt down, a lot of houses. People are saying the whole town has gone," she said.

Another described seeing huge fireballs in the sky and "walls of flames". Some 200 residents took refuge in a pub. No fire engines could immediately get into the town to help them.

Fire officials have advised residents to stay and defend their homes against bushfires as most homes are damaged not by the firefront but by embers blown on to roofs. Evacuation is a last resort and officials warn residents to leave well before a firefront nears.

A Victorian fire official said of those killed in Kinglake: "They were late evacuating and the worst place to be is on the road."

Temperatures had reached a state record of 47C (117F), but as a cool front moved in it brought wind changes, pushing existing fires in new and unpredictable directions. Tens of thousands of volunteer firefighters were put on standby across the three states. Fires in New South Wales and South Australia were last night being successfully kept away from residential areas. In New South Wales, helicopters and planes dumped water on three out-of-control fires north of the state capital, Sydney, leaving a heavy haze hanging over the city.

The fear is that if winds pick up the fires will spread. Victoria State premier John Brumby said: "It's been, I think, the worst day in our history."

In 1983, a wildfire killed 75 people, on a day known as Ash Wednesday, a figure that could yet be replicated in the days to come.

"We've still got a massive amount of work to do to get these fires under control," said Victoria's country fire authority deputy chief, Greg Esnouf. "It's going to take days and days to get them under control."

· This article was amended on Thursday 12 February 2008. The Gippsland farming region is in the east, not north-west, of Australia. This has been corrected.